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Covered Call In A Passive Income Portfolio

Covered Call ETFs has become a popular addition to passive income investment portfolios. This is especially true for Covered Call ETFs tracking a diversified index.

One of the reason behind the increased interest in Covered Call ETFs is the low interest rates. In most countries, simply putting your money into a savings account just isn’t a good way of generating an income anymore. Even if you agree to put your money into a bank account that comes with a lot of restrictions for you (e.g. when it comes to the ability to take out money or switch to another savings type) you will probably only get a very small interest on your capital.

It therefore comes as no surprise that individuals looking for passive or semi-passive streams of income are scrambling to find new alternatives to the trusty old savings account. The bond market isn’t looking very appealing right now, and for many individuals, doing an investment directly into the stock market is to time consuming and skill-intensive.

Diversified Covered Call ETFs are generally much less volatile than individual securities. One example of a Covered Call ETF that has a history of non-volatility is Horizons S&P 500 Covered Call ETF, which is traded on the NYSE Arca. It should be noted however that this is still pretty new addition to the ETF market, so the history isn’t very long. Another example of a popular Covered Call ETF tracking the S&P 500 is Powershares S&P 500 BuyWrite Portfolio, also traded on NYSE Arca.

The S&P 500 is an American stock market index based on the market capitalizations of 500 very large companies having common stock listed on the NYSE or NASDAQ. If you want to invest in a Covered Call ETF that is considerably more specialized than those tracking the S&P 500, you can for instance go for the Horizons Financial Select Sector Covered Call ETF. This ETF currently holds shares in companies such as Berkshire Hathaway, J.P. Morgan Chase, and Wells Fargo. It is traded on NYSE Arca.